PH gov't protests WTO ruling on alcohol tax

ABS-CBN News

Posted at Aug 16 2011 01:15 PM | Updated as of Aug 17 2011 06:35 AM

MANILA, Philippines - The government will ask the World Trade Organization (WTO) to revisit a ruling that declared the excise tax levied on spirits from the European Union and the United States in violation of the trade body's rules, officials said on Tuesday.

The Department of Trade and Industry said it was working with local distillers for an appeal, which it expects to lodge within two months. Local distillers said that the WTO did not carefully analyze the Philippines' defenses in the tax dispute.

"We will appeal the ruling," Trade Secretary Gregory Domingo told reporters via a mobile text message.

"We are thoroughly reviewing the WTO report while at the same time working closely with our relevant stakeholders to present a strong case in the appeal process," added Undersecretary Adrian Cristobal.

The WTO ruled on Monday that the Philippines' alcohol taxes discriminated against brands such as Jack Daniel's and Jim Beam as well as Spain's Brandy de Jerez, while favoring domestic producers in the archipelago's $3.4 billion spirits market.

The EU and US, the world's No. 1 and No. 2 exporters of distilled spirits, have urged the Philippines to follow the WTO ruling.

"We urge the Philippine government to comply swiftly with the panel's recommendations and rulings, and level the playing field for our exports immediately," US Trade Representative Ron Kirk said in statement.

The WTO generally bars its members from discriminating between imported and domestic products in their tax regimes.

In separate cases filed at the WTO, Brussels and Washington complained the Philippines had violated global trade rules by taxing foreign alcoholic beverages at rates 10 to 40 times higher than brands made in the Philippines from home-grown materials such as sugar and palm.

European experts estimated that exports of European liquor to the Philippines plunged more than 50% from 2004 to 2007 due to the excise tax.

'No discrimination'

Local distillers maintained that the Philippines does not discriminate against imported products. They said imported liquor brands are priced much higher than local ones even without taxes.

"The rates that apply to distilled spirits produced from raw materials such as sugar of the cane, buri palm, coconut, cassava, camote etc. under Section 141 (a) of the Tax Code are enjoyed by both domestic and imported spirits. For example, locally-made Tanduay Rum and imported Bacardi Rum pay the same rate of excise tax at P14.68/proof liter and yet their net retail prices (750ml, excluding excise tax and VAT) are worlds apart - Tanduay at P50 and Bacardi at P430," said Olivia Limpe-Aw, president of the Distilled Spirits Association of the Philippines.

Limpe-Aw said that the decline in EU and US exports to the Philippines cannot be attributed to the local tax system, but to other factors, including slower economic growth, low purchasing power and inflation. "Even domestic spirits have experienced lower consumption this year."

The WTO ruling is expected to help US producers like Brown-Forman, owner of the Jack Daniel's brands, and Fortune Brands, makers of Jim Beam whiskey, break into the Philippines' spirits market.

US had brought two legal claims against the Philippines' tax system, and prevailed on both, the US Trade representative said. - With reports from Reuters, AFP